Your Right to Know

Eliminating a potential tax cut for payday lenders is among the changes the Senate is examining
as it prepares to pass a bank tax overhaul bill next week.

House Bill 510 is designed to create a fairer bank tax system by replacing two current bank
taxes with a broad financial-institutions tax. The goal is to create a revenue-neutral plan that
closes some loopholes used by some large banks and lowers the rates for smaller community
banks.

But with a committee vote less than a week away, senators in both parties said yesterday that
they were still waiting on data from the Department of Taxation to help determine what revenue
target number would achieve neutrality. When Gov. John Kasich introduced the bill, he set the
target at $225 million, but House Republicans lowered it to $200 million.

The Senate also realized that some House changes to the bill could lower the tax rate for payday
lenders, a sometimes-criticized industry that offers two-week loans at annual interest rates that
can approach 400 percent.

Payday lenders currently pay the dealers-in-intangibles tax, an 8-mill rate. Under the
House-passed bill, they would pay the commercial-activities tax, a 2.6-mill rate.

“That is something that needs to be addressed,” said Sen. Chris Widener, R-Springfield.

Rep. Ron Amstutz, R-Wooster, the House Finance Committee chairman who directed efforts to amend
the bill in the House, said there was no intent to cut taxes for payday lenders. “We were just
trying to create a level playing field as much as we could.”

Legislators said switching a number of nonbank financial entities to the commercial-activities
tax was designed to deal with issues raised by groups such as major retailers and auto
manufacturers with financing arms. But payday lenders were scooped up in the process.

“We were focusing on some of the known issues and the large entities,” Amstutz said. “I don’t
think we even realized the (dealers-in-intangibles tax) included others that are less favored
because of their business models.”

The question is how to fix it.

“The legislature has assured us that issue will be addressed,” said Rob Nichols, spokesman for
Gov. John Kasich, who has said the bill is one of his top priorities.

The Ohio Council of Retail Merchants, whose members include major retailers and payday lenders
affected by the bill, has proposed keeping payday lenders paying 8 mills under the new
financial-institutions tax, but letting others remain under the CAT tax. Gordon Gough, executive
vice president of the council, said he thinks the payday break was unintended, and his group is
seeking revenue neutrality.

Robert Grieser, top lobbyist for Dublin-based Checksmart, said his financial advisers have said
the House-passed bill would cause a tax increase for the company, though he did not know why. “I
understand there is a feeling that it provides a tax cut to some short-term loan companies.”